(EPS Bt0.04), a slump of 43% qoq and 82% yoy. The impact of the weak automotive industry, from production cuts and temporary shutdowns, has hit TSC earnings. Sales have fallen to Bt360mn, down 33% qoq and 39% yoy. This fall was inline with auto and motorcycle production falls of 46% and 42%, respectively, in the first quarter. The gross margin was down to 12% from 16% in the previous quarter and 20% last year from the lower utilisation. The S. G. & A. was down to Bt43mn (-40% qoq, -31% yoy). This lesser figure is derived from a decrease in royalty fees, sales promotion expenses and employee charges. The company is focussing on cost control activities in order to improve earnings. Interest was zero as TSC is a debt free operation.

2Q09 earnings will continue poor with 2H09 to improve The current world economic crisis has widened and has severely affected auto demand and is more severe than our previous forecast. First quarter auto and motorcycle production slumped by 46% and 42%, respectively. The second quarter performance will likely still slump by 40-50%. However, in the second half, we expect production will improve to only –30% result after inventory stocks have been cleared. Thus, we have further revised down our earnings projections. We forecast the 2009 TSC sales to fall 30% to Bt1,600mn and the net profit to reach Bt78mn (EPS Bt0.30), down 59%.

Expect next year to recover with a debt-free, maintained HOLD The current TSC share price of Bt3.88 is moving at a base level after slumping from Bt7-8 before the US financial crisis. The current share price has not recovered inline with other auto stocks. The current share price is trading on a rather high 2009 PER of 12.9x with an EV/EBITDA of 4.5x and we see next year’s PER down to just 6x from a recovering auto sector. In addition, TSC has a very strong financial status, as they are debt-free with cash of Bt323mn. We estimate the TSC fair value at Bt5 based on a 2010 PER of 7-8x. Overall, we are maintaining our recommendation of HOLD.